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SERVICES REGULATIONS
1. (SBU) Summary: Minister of Domestic Trade Shafie Apdal
and Ambassador LaFleur discussed IPR enforcement, planned new
regulations on distributive trade, and the security situation
in eastern Sabah state. The Ambassador emphasized that both
IPR and distributive trade would be significant issues should
the U.S. and Malaysia begin negotiations on a FTA. Shafie
noted plans for a special IPR court and legal changes that
would allow action against owners of premises where pirated
IPR is traded. However, he said political pressures would
require him to initiate problematic changes in distributive
trade regulations. Discussion of East Sabah will be reported
septel. End Summary.
2. (SBU) Ambassador LaFleur, accompanied by economic
counselor and trade officer, called on Minister of Domestic
Trade and Consumer Affairs (MDTCA) Shafie Apdal February 24.
Also present were Under Secretary Lee Kam Swee and Principal
Assistant Secretary Surrendren Sthasivam of MDTCA's Planning
and Development Division. The Ambassador raised two issues
that would be top priorities for the U.S. should it begin
negotiations on a FTA with Malaysia: IPR enforcement and
MDTCA plans for changes to Malaysian regulations covering
distributive trade.
Intellectual Property Rights Enforcement
----------------------------------------
3. (SBU) The Ambassador congratulated Shafie on the steps he
had taken so far to strengthen Malaysia's protection of
intellectual property. He asked if Shafie had come to an
agreement with the Attorney General on the proposed special
IPR court. Shafie said both the Attorney General and
Malaysia's Chief Judge have agreed to designate a court
within Malaysia's existing system that would have special
competence for IPR cases. He said he wanted to expedite
prosecution of IPR cases to send a good signal to industry.
Shafie noted that he had created an intelligence unit within
MDTCA staffed with police investigators that already is
producing results. He said this unit was responsible for
launching piracy cases against four licensed optical disc
factories, two in Kuala Lumpur and two in Johor Bahru. The
unit works closely with industry representatives, such as
those of the Motion Picture Association (MPA). Shafie
promised that "there will be more (cases) to come."
4. (SBU) The Ambassador referred to a recent press report
that Shafie was seeking authority for his ministry to take
action against owners of malls and other retail outlets where
pirated IPR is widely available. Shafie said that retail
property licenses are issued by local governments in
Malaysia, but that he is seeking changes to the law to give
his Ministry the power to shut down repeat offenders. In the
meantime, MDTCA is reaching out to local officials to
persuade them to take action themselves. The Ambassador
suggested MDTCA consider sponsoring a voluntary campaign in
which mall owners would forbid the sale of pirated IPR on
their premises and promote this step to upscale customers who
want bona fide goods and who wish to stay within the law.
Shafie said he would consider the idea.
5. (SBU) The Ambassador reminded Shafie of a letter he sent
him in December about a piracy case involving the computer
games firm Electronic Arts (EA). Economic counselor provided
the Minister with a copy and Shafie asked his staff to look
into the matter. The Ambassador asked Shafie if there was a
way for MDTCA to take immediate action against licensed
optical disc lines when there was solid evidence that they
were engaged in piracy. Shafie responded that the firms were
able to obtain legal injunctions against an action to revoke
a license prior to a conviction. He said he had obtained a
ruling from the Attorney General that gave him administrative
authority to pull a license, but that he wanted to change the
law so that he would have clear legal authority.
6. (U) The Ambassador raised the proposed U.S.-Malaysia IPR
Roundtable, now tentatively scheduled for April 20, and urged
Shafie to participate, if only to deliver opening remarks.
Shafie said he hoped he could. He also said he wished
Malaysian artists would do more to discourage the purchase of
pirated goods.
Distributive Trade Regulations
------------------------------
7. (U) NOTE: For the Malaysian government, distributive
trade refers to the distribution, marketing and retailing of
KUALA LUMP 00000331 002 OF 002
goods after their manufacture or importation into Malaysia.
It also covers some businesses that provide direct services
to consumers, such as restaurants. Malaysian government
authorities are still interpreting the range of commercial
activities that will be covered by the new distributive trade
regulations.
8. (SBU) The Ambassador emphasized that many of the measures
that reportedly would be covered under MDTCA's new
distributive trade regulations would run counter to what the
U.S. would like to see should we decide to negotiate a FTA.
These include rules that would force firms to establish
separate production and distribution arms, and otherwise
rearrange their corporate structures. Particularly
problematic would be the proposed rules requiring that 30
percent of the equity in distributive trade operations be
held by bumiputera (ethnic Malay) shareholders. The
Ambassador suggested that MDTCA defer implementation of the
new regulations pending a decision on the FTA negotiations.
He observed that it would make things easier for U.S. and
Malaysian negotiators if they could deal with proposals,
rather than regulations in force.
9. (SBU) Shafie said he realized that the distributive trade
regulations caused issues for some parties, but stressed that
he is under considerable pressure, including from other
Cabinet members, to release them now. He argued that many
businesses want certainty so they can make plans for the
future and that the current situation is awkward for
everyone. He said he had discussed the impact on foreign
investors with Minister of International Trade and Industry
Rafidah Aziz, but told her that the "discrepancies" needed to
be raised in Cabinet. He concluded that he was given a
deadline by the Cabinet to implement the new regime and
intended to meet it.
LAFLEUR

Raw content

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000331
SIPDIS
SENSITIVE
SIPDIS
STATE PASS USTR FOR B. WEISEL
COMMERCE FOR 4430/MAC/EAP/BAKER
COMMERCE PASS PTO FOR FOWLER
E.O. 12958: N/A
TAGS: KIPR, ETRD, MY
SUBJECT: TRADE MINISTER SHAFIE ON IPR AND DISTRIBUTIVE
SERVICES REGULATIONS
1. (SBU) Summary: Minister of Domestic Trade Shafie Apdal
and Ambassador LaFleur discussed IPR enforcement, planned new
regulations on distributive trade, and the security situation
in eastern Sabah state. The Ambassador emphasized that both
IPR and distributive trade would be significant issues should
the U.S. and Malaysia begin negotiations on a FTA. Shafie
noted plans for a special IPR court and legal changes that
would allow action against owners of premises where pirated
IPR is traded. However, he said political pressures would
require him to initiate problematic changes in distributive
trade regulations. Discussion of East Sabah will be reported
septel. End Summary.
2. (SBU) Ambassador LaFleur, accompanied by economic
counselor and trade officer, called on Minister of Domestic
Trade and Consumer Affairs (MDTCA) Shafie Apdal February 24.
Also present were Under Secretary Lee Kam Swee and Principal
Assistant Secretary Surrendren Sthasivam of MDTCA's Planning
and Development Division. The Ambassador raised two issues
that would be top priorities for the U.S. should it begin
negotiations on a FTA with Malaysia: IPR enforcement and
MDTCA plans for changes to Malaysian regulations covering
distributive trade.
Intellectual Property Rights Enforcement
----------------------------------------
3. (SBU) The Ambassador congratulated Shafie on the steps he
had taken so far to strengthen Malaysia's protection of
intellectual property. He asked if Shafie had come to an
agreement with the Attorney General on the proposed special
IPR court. Shafie said both the Attorney General and
Malaysia's Chief Judge have agreed to designate a court
within Malaysia's existing system that would have special
competence for IPR cases. He said he wanted to expedite
prosecution of IPR cases to send a good signal to industry.
Shafie noted that he had created an intelligence unit within
MDTCA staffed with police investigators that already is
producing results. He said this unit was responsible for
launching piracy cases against four licensed optical disc
factories, two in Kuala Lumpur and two in Johor Bahru. The
unit works closely with industry representatives, such as
those of the Motion Picture Association (MPA). Shafie
promised that "there will be more (cases) to come."
4. (SBU) The Ambassador referred to a recent press report
that Shafie was seeking authority for his ministry to take
action against owners of malls and other retail outlets where
pirated IPR is widely available. Shafie said that retail
property licenses are issued by local governments in
Malaysia, but that he is seeking changes to the law to give
his Ministry the power to shut down repeat offenders. In the
meantime, MDTCA is reaching out to local officials to
persuade them to take action themselves. The Ambassador
suggested MDTCA consider sponsoring a voluntary campaign in
which mall owners would forbid the sale of pirated IPR on
their premises and promote this step to upscale customers who
want bona fide goods and who wish to stay within the law.
Shafie said he would consider the idea.
5. (SBU) The Ambassador reminded Shafie of a letter he sent
him in December about a piracy case involving the computer
games firm Electronic Arts (EA). Economic counselor provided
the Minister with a copy and Shafie asked his staff to look
into the matter. The Ambassador asked Shafie if there was a
way for MDTCA to take immediate action against licensed
optical disc lines when there was solid evidence that they
were engaged in piracy. Shafie responded that the firms were
able to obtain legal injunctions against an action to revoke
a license prior to a conviction. He said he had obtained a
ruling from the Attorney General that gave him administrative
authority to pull a license, but that he wanted to change the
law so that he would have clear legal authority.
6. (U) The Ambassador raised the proposed U.S.-Malaysia IPR
Roundtable, now tentatively scheduled for April 20, and urged
Shafie to participate, if only to deliver opening remarks.
Shafie said he hoped he could. He also said he wished
Malaysian artists would do more to discourage the purchase of
pirated goods.
Distributive Trade Regulations
------------------------------
7. (U) NOTE: For the Malaysian government, distributive
trade refers to the distribution, marketing and retailing of
KUALA LUMP 00000331 002 OF 002
goods after their manufacture or importation into Malaysia.
It also covers some businesses that provide direct services
to consumers, such as restaurants. Malaysian government
authorities are still interpreting the range of commercial
activities that will be covered by the new distributive trade
regulations.
8. (SBU) The Ambassador emphasized that many of the measures
that reportedly would be covered under MDTCA's new
distributive trade regulations would run counter to what the
U.S. would like to see should we decide to negotiate a FTA.
These include rules that would force firms to establish
separate production and distribution arms, and otherwise
rearrange their corporate structures. Particularly
problematic would be the proposed rules requiring that 30
percent of the equity in distributive trade operations be
held by bumiputera (ethnic Malay) shareholders. The
Ambassador suggested that MDTCA defer implementation of the
new regulations pending a decision on the FTA negotiations.
He observed that it would make things easier for U.S. and
Malaysian negotiators if they could deal with proposals,
rather than regulations in force.
9. (SBU) Shafie said he realized that the distributive trade
regulations caused issues for some parties, but stressed that
he is under considerable pressure, including from other
Cabinet members, to release them now. He argued that many
businesses want certainty so they can make plans for the
future and that the current situation is awkward for
everyone. He said he had discussed the impact on foreign
investors with Minister of International Trade and Industry
Rafidah Aziz, but told her that the "discrepancies" needed to
be raised in Cabinet. He concluded that he was given a
deadline by the Cabinet to implement the new regime and
intended to meet it.
LAFLEUR